William Edwards Deming (1900-1993) is widely acknowledged as the leading thinker in the field of quality. He was a statistician and business consultant who is well known for his “14 Points for Management”. He used to say that ‘management is prediction,’ by which he meant that every decision is also a prediction about the future.
The rate of change continues to increase, and as it does the business environment becomes ever more complex. Amidst this complex and uncertain environment, business still has to accomplish something – by getting work done. And getting work done is increasingly outsourced to 3rd parties. In 2017, the global traditional outsourcing industry generated $88.9B in revenue. The total contract value of the information technology outsourcing (ITO) market amounted to $64.3B.
What is driving this staggering growth – The lack of in-house IT talent is one of the main drivers for IT Outsourcing.
- According to a 2018 Jobsite UK Survey, over 70% of technology employers in the UK expect to face a talent shortage.
- In the USA, IT talent shortages also a growing problem. Gartner predicts that by 2020 there will be 1.4 million computer specialist job openings.
- And if that is not enough, McKinsey predicts in a 2018 discussion paper that automation and artificial intelligence will speed up a shift in required workforce skills.
Why IT Outsourcing is highly suitable in Financial Services – Because the primary focus is ‘information’, financial services organizations are more easily outsourced than material products. There is no need to coordinate a flow of physical goods together with the information flow. In addition, numerous financial business processes involve highly repetitive tasks which can easily be standardized.
Nonetheless, there are issues and risks with ITO, of which 3 stand out:
- Maintaining the privacy of clients’ financial information.
- The High degree of regulation imposed on Banks, Insurance Companies and Asset Managers.
- Difficulty to manage suppliers and the challenge to coordinate Supplier Risk Management across interdependent processes and departments.
Motivation for ITO
NET(net) is assisting IT organizations in determining how best to respond in rapidly changing business and technology conditions. Further increasing this complexity, is that portions of the IT budget is shifting to the business, who then also become a stakeholder in the ITO process.
The pivotal questions we help you answer are: What is the best way to:
- Source and Manage IT products and services
- Manage cloud, service and technology suppliers
One answer to the 1st questions could to ‘outsource (part of) IT’.
In a recent study by the Global Sourcing Association, buyers were asked what business issues motivate them to outsource, while service providers were asked the same regarding their clients.
Although improving Customer Experience and Moving to ‘as a Service’ have honorable mentions, driving Cost Savings clearly stand out.
How to get to desired outcome
The reason “why outsource” apparently is still very much a cost reduction play and the process to execute is equally traditional.
Design Outsourcing Strategy – NET(net) supports clients in designing the appropriate Outsourcing Strategy. Unfortunately, over the years, the range of models have grown, which requires thorough analysis and planning to drive successful outcomes.
- Outsourcing scope – What services are outsourced, what are the digital enablers and who receives those services.
- Supplier Strategy – Will the ITO service be provided by one or multiple suppliers.
- Sourcing Approach – What approach is taken to select the ITO supplier.
- Resource Ownership and Location Strategy – Where will the ITO services be provided from.
- Pricing – What pricing is the best fit for the outsourced activity.
- Contracting type and Length – Is this support a Short Term or Long-Term business strategy.
Strategic Supplier Management – We all know that economic value realized during supplier negotiations is eroded over time if the supplier, and the associated agreement, are not effectively managed.
Key to Strategic Supplier Management is the ability to have insight to Outsourcing Category Management, Outsourcing Supplier Performance and Achievement of Outsourcing Business Objectives.
There are various tools available, and some of them better or more costly than others, however, going back to Deming’s Total Quality Management principles, how many of them truly support an integrated quality management process.
NET(net) has developed proprietary technology to manage ITO contracts Service Level Agreements, Key Performance Indicators and various other Watchlist Items together with integrated Service Delivery Management.
Utilizing technology to streamline the process with WIN(win) institutes a standard methodology to enable and retain more savings and consistency with your strategic suppliers.
You can do it, we can help.
NET(net) is of the opinion that Outsourcing Contracts will be more Outcome Based. Suppliers will become System Integrators sharing the Performance expectation and Risk Management profiles. And within this complex environment, Procurement is forced to step up their game as they become more involved in the ITO process.
If you would like to discuss any content in this article, or review your specific situation, please don’t hesitate to use the ‘contact us’ link on this page and we will schedule a call.
Celebrating 17 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002.
NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at firstname.lastname@example.org, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.
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